Frankfurt threatens to take on London if iX deal fails

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Werner Seifert, chief executive of Deutsche Borse, the Frankfurt stock exchange, has drawn up plans to go head to head with the London Stock Exchange if LSE members vote down the iX merger plan in September.

Werner Seifert, chief executive of Deutsche Borse, the Frankfurt stock exchange, has drawn up plans to go head to head with the London Stock Exchange if LSE members vote down the iX merger plan in September.

Mr Seifert, who is due to become chief executive of the combined iX megabourse, has made it clear that he will revive plans for an initial public offering of the Deutsche Borse if the iX merger plan hits the rocks.

Plans to raise up to 500m euros to fund a new pan-European market through an initial public offerings (IPO) were drawn up by Mr Seifert earlier this year but shelved in May when it became clear that London was keen to do a deal.

However, with opposition still smouldering among the smaller stockbrokers who account for 30 per cent of the LSE's 297 members, Mr Seifert has made it know that the plans could easily be revived.

Mr Seifert and Mr Cruickshank are taking advantage of the summer lull to lobby brokers in support of the iX deal, which needs 75 per cent backing of LSE members to go through.

Mr Seifert believes that with screens accessing Xetra - Frankfurt's electronic trading platform already installed in remote sites across European centres and the US - Frankfurt will find it easier than competitors to gain acceptance for a pan-European offering. Frankfurt also believes that the fact that it owns its own clearing and settlement via Clearstream will give it the edge in being able to offer cheaper cross-border packages than its rivals.

A source close Mr Seifert said on the weekend: "Mr Seifert has a clear objective and that is to run the dominant exchange in Europe. He has already succeeded in the futures markets where he has elbowed Liffe out of the way and has effectively taken over the Chicago Board of Trade. He has his plan B and will win either. Unfortunately it is far from clear that London has an alternative plan if the iX merger fails."

Another senior exchange executive, who has many dealings with Mr Seifert in the past, added: "One thing about Mr Seifert is that whoever has dealt with him has always emerged weaker whether the negotiations resulted in an agreement or not."

Rebel members led by Brian Winterflood, of Winterflood securities, the leading small companies dealing firm, are arguing that London would be better off ditching Frankfurt and merging with Nasdaq, the American technology heavy market. However, Don Cruickshank, the LSE chairman, has told brokers that if the iX deal collapses there is no guarantee that faced with the choice between London and Frankfurt Nasdaq would necessarily plump for London.

Frankfurt already has a much better brand image for technology companies through its well regarded Neuer Markt. Investment bankers also point out that Continental Europe rather than the UK is now seen by most US firms as the key growth area for both merger and acquisitions and IPOs. As one put it: "What will London give Nasdaq? The UK is Europe's biggest equity market but it is not the European equity market and that is what they want."

Shares in the London Stock Exchange have had a rocky start to dealing. They closed their first week at £19.50, down 30 per cent on the opening price of £28 and valuing the exchange at £580m, well below the £700m talked about last month.

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